Despite the controversy over the awarding of the 2022 World Cup to Qatar, the country is capitalising on its newfound international profile and inbound foreign direct investment (FDI) is soaring.
FIFA’s awarding of the World Cup to Qatar in 2010 came under high levels of scrutiny, and allegations of bribery were rife. However, Qatar was cleared of corruption charges in 2014, although the FIFA president at the time, Sepp Blatter, has recently said giving the tournament to Qatar was a mistake and he wanted the 2022 World Cup to go to the US.
Many people could not understand the awarding to Qatar. Fingers were pointed at a country with limited football history, sketchy human rights laws and a lack of necessary infrastructure (including football stadiums).
The treatment of workers, typically foreign, in building stadiums and other infrastructure has also drawn the world’s attention. The Guardian estimates that 6,500 workers have died preparing the country for the tournament. The newspaper cited government sources in compiling the data. However, the Qatari government strongly denies the claims, stating that the data is not specific to the construction of stadia and falls in line with expected mortality rates.
Meanwhile, International Labour Organization research found 50 work-related deaths across Qatar in 2020, 506 severe injuries and 37,000 injuries that were mild to moderate. Qatar’s organising committee has confirmed three deaths since the construction of the stadia began, with 37 non-work-related fatalities. In reality, it is impossible to gauge an accurate number as the data is not proactively compiled.
Additionally, the competition, traditionally held in the summer in the Northern Hemisphere, has been moved to winter due to unplayable temperatures in the country in June and July. This move has disrupted almost all global major football league calendars and caused concerns regarding player safety.
Qatar is reaping the rewards of hosting the World Cup
Qatar will be the first Middle Eastern country to host the World Cup. It is using the global stage to propel interest in its economy, and the country has already witnessed a surge in greenfield FDI.
Qatar was one of a small number of countries to see its number of greenfield FDI projects increase in 2020, with most countries witnessing a significant fall due to Covid–19 lockdowns. The number of projects Qatar received (30) was relatively small; however, in 2021, the number of inbound projects coming into the country more than tripled. So far in 2022, the number is already higher than that achieved in 2021.
With foreign investors flocking to Qatar, it has become, on a per capita basis, one of the most successful countries in the world for FDI. In 2021, the country ranked behind only Singapore, Ireland and the United Arab Emirates in terms of inbound greenfield FDI per one million people. In 2022, it looks like the gap between it and the top locations will narrow yet again.
Competition for foreign investment within MENA region
Inward investment into the Middle East and North Africa (MENA) region has been increasing. Between 2020 and 2021, the number of greenfield investments doubled. The region now accounts for 8.4% of global greenfield FDI projects (up from 5.1% in 2019).
In 2019, Qatar was the tenth most popular FDI destination within the MENA region by FDI project numbers. By 2021, it had climbed to fourth and in 2022 it is currently on course to overtake Egypt and claim third position.
This is quite an accomplishment, especially given the size and development of other countries in the region. Dubai is the leading city destination for FDI in the MENA region. Furthermore, Saudi Arabia, the region’s largest economy, has been making great strides in inward investment. The country’s Vision 2030 sets out numerous targets to diversify its economy and increase living standards for its people. Foreign investors are seeing the vision in a positive way – FDI project numbers more than doubled in 2021 compared with pre-Covid levels.
Who is investing in Qatar, and in which sectors?
When it comes to preparations for the World Cup, between 2019 and 2022 it has been primarily foreign companies building hotels in Qatar. However, the country is witnessing a diversified investment portfolio. Foreign investments in this time have come from 23 different sectors., and the country is seeing a notable increase in tech-related investments, including computer programming activities, software as a service, operating systems and apps, and fintech. Business services including consultancy, advertising and marketing, and trade and development have also risen rapidly.
Since 2019, companies from 43 countries have established a presence in Qatar. The US is the leading source market for FDI into Qatar, accounting for one-quarter of all projects. The UK and UAE are also popular source markets. US companies are investing almost five times as much in 2021–22 as they did in 2019–20.
Hotel brands such as Centara, Hilton and Marriott have been particularly active in Qatar. While rooms will no doubt sell out during the World Cup, it is future footfall that is most important to these global brands. Tourist visits have begun to pick up after Covid-19 caused numbers to fall in 2020, according to Qatar Tourism.
Qatar’s hotel sector display resiliency in H1 2022, despite a wave of Covid-19 affecting January and February arrivals.
In the tech sector, Google and Microsoft have recently made multiple investments in Qatar. Google announced the openings of a new local office, cloud region and centre of excellence, while Microsoft has opened a cloud region and office, including a customer innovation centre.
Other large job-creating investments include those by iLife Digital and UBS Group. iLife Digital, a US-based hardware, software and services company, announced plans to set up a PC manufacturing plant in Qatar Free Zone in 2021. The new factory will create as many as 1,500 jobs and will deliver an output of approximately 350,000 units annually.
In 2022, UBS Group, a Switzerland-based multinational investment bank, announced plans to open a new business solutions hub in Doha. The new hub will contribute to advancing financial digitalisation in Qatar while supporting local talent development. The company will add up to 200 digital experts over the next few years, and the hubs will provide centralised shared services to the bank in a variety of functions, among them finance, technology, human resources, operations, risk control, legal and internal audits.
Can Qatar maintain its foreign investment rise after the World Cup?
To remain prosperous, Qatar will hope that Covid-19 infections remain low. The number of cases peaked in January 2022, then fell, but rose again in July. Numbers have been falling since September, however.
Another key battle is inflation. Although it is on the up in Qatar, the figure is still lower than most developed countries. Qatar’s annual consumer price index rose to 6.3% in September after showing signs of falling in July and August. According to the International Monetary Fund, Qatar's yearly inflation rate for 2022 will be 4.5% – lower than 166 other countries in the world.
Also, Qatar's economy is forecast to grow by 3.4% in 2022 (in real terms) and then by 2.4% in 2023. However, this is slower than other Middle Eastern countries such as Saudi Arabia and the UAE.
Qatar will be hoping to further build on the media spotlight that will be shone on it during the World Cup. It must present opportunities to potential investors and demonstrate how other foreign companies are being successful. Promoting its proposition in terms of high connectivity, available and accessible talent, economic stability and minimal red tape is essential. It will never have a better time to do so.
Although the final whistle is blown on the World Cup in mid-December, Qatar will be hoping for continued high levels of foreign investment for many years to come.